why do people here hate this guy?

[JackRab]

I googled 'turd in ocean'...

Is that you @destriero? Than that's proof....

Funnily a few hot chicks popped up too...

Or did you mean that you want me to explain how I ended up in your little hissy-fit in this thread?

 

[destriero]

Awesome, thanks for explaining the backstory there. I always figured that sites like those were beneath you and not even on your radar. You were doing a favor for a family member and in no time you saw the incorrect options pricing. Then you destroyed them. You were using Hoadley Tools in realtime right?

I was so inspired by that story of yours that I wrote my own crude primitive tools to price binary options near realtime. I went on Nadex and saw how truly horrible the odds were against me. I wasted days on there with not much to show for it. I only found a glimmer of an edge on daily binaries in the last hour of trading. Still not worth the effort.

Nadex used to offer touches, but realized that the sharks would only take the touch bets, hedged in spot. A digital (exp payout) is simply a synthetic strip of vanilla verticals. So you can treat the hedging similarly -- the issues are the edge loss of hedging in-kind. That's why you hedge with spot and not their vola.

Saxo, Trinitas, Oanda, SocGen all offered (retail) touches and got beat. Oanda got beat due to the geometry; not realizing that they were discounting fwd-starts far too heavily. Binary.com is the only dealer standing.

The issue with binary.com is trading from the US (cannot). I had account holders all over the EU and one guy in the IOM took us (me, partners) for seven figures. Binary.com is legit, but the risk is too great if you are using proxies.

Any 1st gen exotic hedged with spot (weakly) results in a synthetic short straddle as you approach the barrier/strike. It's a pure replication if the trading is frictionless. Really no different (digitals) than Niederhoffer and his short puts. He could have stayed liquid had he sold 10-lots ES futures into his exposure and a daily n-sigma. Market rallies you win huge on vola/moneyness (reduction in gamma/dG) and lose small on futures. Add a few/reduce a few as deltas drift (moneyness -> dG).

Re: Nadex. The bets are poor as they are essentially a packaged strip of verticals. A single 20-delta vanilla vertical in listed markets is (practical) fungible. 99% of their customers are unaware. The remaining simply want a daily wager.

 

[MoneyMatthew]

Thank you for the detailed explanation on how you beat all of these sites. I did not know that the strategy was limited to touches, I thought you were beating standard binaries also? Because the money that can be made is well into the 6 and 7 figures have you ever considered getting some type of citizenship in an EU nation? You are doing all of the work, you won't need a partner then. A flight over the Atlantic, spend a few days in some EU nation and back home to visit the family. You probably have enough money and it is not worth the hassle for you?
I can't believe it is down to just one site on the touches.

Agreed, Nadex sucks. Every now and then their one or two market makers wouldn't take out a bid or offer that narrowed the spread. This allowed retail to retail transactions to take place. Sometimes I could get a fill at a slight discount to what my model was pricing. This might happen just a few times a day. Not worth the effort, can't even scrape out minimum wage trying to play that game. A big waste of time on my part.

 

[destriero]

No, both offered edge (at Oanda). You could structure a fwd start digital as little as 30 pips away from spot (EURUSD for example) for huge edge.

 

[MoneyMatthew]

No, both offered edge (at Oanda). You could structure a fwd start digital as little as 30 pips away from spot (EURUSD for example) for huge edge.

Is that still possible? Or did you make so much money off of them that they now have better pricing models in place? Did you ever try to milk any of these places slowly or was it just an all out assault from the start? I am sure the sudden large losses on their side made them act quickly.

 

[destriero]

Is that still possible? Or did you make so much money off of them that they now have better pricing models in place? Did you ever try to milk any of these places slowly or was it just an all out assault from the start? I am sure the sudden large losses on their side made them act quickly.

No, Oanda killed the product something like 8 years ago. You were limited to $20K per SSN, so we had something like 12 accounts open in various SSNs. The box-option markets were 10-12% wide and then they went 80% wide, effectively shutting down trading. I wired-out when all positions were cleared. The following week they issued a PR stating that, "we are ceasing box option markets due to US market regs."

Oddly, the boxes were killed worldwide, even the white-labels through Rabobank and others. Seems a bit coincidental. There was no recent US regs pushed thru, and others were offering digitals; Saxo, Nadex, etc.

 

[destriero]

I will say though that it was not all roses and sunshine. I once had a EURJPY no-touch hedged with spot (bull-bet under mkt) that opened on Monday Asia trading... the EURJPY dot-shotted like 80 pips in 20 minutes, taking out a $20K box (max possible).

I made back $5-6K on the hedge, but EBS never showed the mkt in EURJPY getting within *30* pips of the barrier. IOW, I got fvcked. A few weeks later I found the arb after messing with Paige's account. I had gotten nowhere with Oanda's compliance officer, so it was sweet justice to take them out.

We were fairly discrete, but you have no idea how persistent it will be, especially in a dealer-mkt. I had learned that during the RAES arb in multi-listed equity ops in 2000.

I tried to get Mav (on et) involved but it was late in the game. We took them, all told, for about $700K? Over a dozen accounts.

 

[destriero]

Thank you for the detailed explanation on how you beat all of these sites. I did not know that the strategy was limited to touches, I thought you were beating standard binaries also? Because the money that can be made is well into the 6 and 7 figures have you ever considered getting some type of citizenship in an EU nation? You are doing all of the work, you won't need a partner then. A flight over the Atlantic, spend a few days in some EU nation and back home to visit the family. You probably have enough money and it is not worth the hassle for you?
I can't believe it is down to just one site on the touches.

Agreed, Nadex sucks. Every now and then their one or two market makers wouldn't take out a bid or offer that narrowed the spread. This allowed retail to retail transactions to take place. Sometimes I could get a fill at a slight discount to what my model was pricing. This might happen just a few times a day. Not worth the effort, can't even scrape out minimum wage trying to play that game. A big waste of time on my part.

I worked in Sweden for the last two years and established dual due to ancestry. I can now open my own accounts at binary.

 

[MoneyMatthew]

I will say though that it was not all roses and sunshine. I once had a EURJPY no-touch hedged with spot (bull-bet under mkt) that opened on Monday Asia trading... the EURJPY dot-shotted like 120 pips in 20 minutes, taking out a $20K box (max possible).

I made back $5-6K on the hedge, but EBS never showed the mkt in EURJPY getting within *80* pips of the barrier. IOW, I got fvcked. A few weeks later I found the arb after messing with Paige's account. I had gotten nowhere with Oanda's compliance officer, so it was sweet justice to take them out.

I tried to get Mav (on et) involved but it was late in the game. We took them, all told, for about $700K? Over a dozen accounts.

WOW! That is amazing. That is almost as much as you made from that options exchange arb right? The one where the OCC wanted some money back or penalties or something? (don't respond or say anything that could get you in trouble, I know it was years ago but...)

 

[destriero]

WOW! That is amazing. That is almost as much as you made from that options exchange arb right? The one where the OCC wanted some money back or penalties or something (don't respond or say anything that could get you in trouble, I know it was years ago but...)

The RAES arb was much bigger. The first week was over a mil. RAES provided retail FIFO up to 20-lots. We had priority as long as we traded retail. The average edge was $0.14 ($14 per contract).

RAES: http://www.cboe.com/LearnCenter/pdf/techatcboe.pdf

Peterffy funded the attorney's to fight the disgorgement and the case was dropped in discovery.